Legislature(1993 - 1994)
01/28/1994 09:15 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE January 28, 1994 9:15 a.m. TAPES SFC-94, #8, Side 2 (574-090) CALL TO ORDER Co-chair Drue Pearce convened the meeting at approximately 9:15 a.m. PRESENT All committee members (Co-chairs Pearce and Frank and Senators Jacko, Kelly, Kerttula, and Sharp) were present with the exception of Senator Rieger who arrived soon after the meeting began. ALSO ATTENDING: Senator Randy Phillips; Randy Welker, Legislative Auditor; Nancy Slagle, Director of Budget Review, Office of Management and Budget; Mike Greany, Director, Legislative Finance Division; and aides to committee members and other members of the legislature. SUMMARY INFORMATION SB 243 - FOUR DAM POOL TRANSFER FUND The bill was HELD in committee pending an overview of the operating budget for the Dept. of Community and Regional Affairs. SB 246 - REIMBURSABLE SERVICE AGREEMENTS Discussion was had with Nancy Slagle, Randy Welker, and Mike Greany. CSSB 246 (Finance) was REPORTED OUT of committee with a "do pass" recommendation, a new title, and a zero fiscal note from the Governor/Office of Management and Budget. SB 247 - STATE LEASES & LEASE-PURCHASE FINANCING Discussion was had with Randy Welker. A draft CSSB 247 (2d Fin), "O" version was adopted. The bill was then HELD in committee for development of more restrictive title language and possible amendment regarding standard leases. SB 243 FOUR DAM POOL TRANSFER FUND Co-chair Drue Pearce advised of a request from Senator Sharp that SB 243 be scheduled for hearing following the overview of the Dept. of Community and Regional Affairs budget. The bill was thus HELD in committee for later discussion. SB 246 REIMBURSABLE SERVICE AGREEMENTS Co-chair Pearce directed that SB 246 be brought on for discussion. NANCY SLAGLE, Director of Budget Review, Office of Management and Budget, came before committee to present an amendment. Senator Randy Phillips sought concurrence in the amendment from the Legislative Auditor and Director of Legislative Finance. Mrs. Slagle explained that the first provision of the amendment removes redundant language prohibiting use of RSAs to merely transfer money between appropriations. That prohibition is covered in the previous sentence of the legislation. (Senator Rieger arrived at this time.) The second change within the amendment eliminates subsection (2) wording requiring that the agency that provides the service have authority, by law, to do so. The change would provide flexibility in areas where an agency provides certain expertise but may not have specific statutory authority. Mrs. Slagle said that the remainder of the amendment simply provides a better flow of bill language. She then directed attention to subsection (2)(A) of the amendment and noted need to correct a typographical error by replacing "of" with "to." RANDY WELKER, Legislative Auditor, came before committee in response to questions from Senator Kerttula. Mr. Welker explained that the bill attempts to curtail past RSA abuses highlighted by an audit of the Dept. of Health and Social Services. Statutory clarification is needed concerning allowable uses of reimbursable service agreements. An RSA should only provide reimbursement for a service. The bill attempts to cut off potential transfer of funds between appropriations under the guise of an RSA. There is presently no statutory language that addresses these agreements. The proposed bill would "put some . . . direction in statute." Responding to an earlier question from Senator Phillips, Mr. Welker said that amendment language proposed by OMB poses no significant problem. Legal authority language proposed for removal is an inherent requirement for use of an RSA. MIKE GREANY, Director, Legislative Finance Division, concurred in comments by Mr. Welker that the proposed amendment would present no problem. Mr. Greany next noted that when the bill was previously before committee, questions were raised concerning legislative ability to continue to make necessary transfers within the annual budget document. Subsequent review has not evidenced problems in that area. Senator Rieger commented regarding subsection (2)(B) language relating to cost allocation methods and asked if it provides a loophole. Mr. Welker acknowledged the concern, but questioned whether there was any way to totally preclude intentional circumvention. It will be incumbent upon OMB to critically review proposed cost allocation plans to ensure that they have a rational basis in cost. Bill language identifies and places responsibility for approval of the plan with OMB. Senator Frank MOVED for adoption of amendment no. 1. No objection having been raised, amendment no. 1 was ADOPTED. Co-chair Pearce noted that the title of the legislation appears to be broad. Senator Rieger concurred in need to limit the title to reimbursable service agreements. Senator Kelly MOVED to tighten and clarify the title. No objection having been raised, amendment no. 2, to restrict the title, was ADOPTED. Co-chair Frank MOVED that CSSB 246 (Fin), incorporating amendment no. 1 and the conceptual title change of amendment no. 2, pass from committee with individual recommendations and the accompanying zero fiscal note. No objection having been raised, CSSB 246 (Fin) was REPORTED OUT of committee with a unanimous "do pass" recommendation, new title, (An Act permitting the use of reimbursable service agreements and other agreements between state agencies to finance the provision of services if the agency that requires the service has the authority to obtain or provide the service and has an appropriation that may be used for that purpose and if the agency that provides the service bills the agency administering the funds available for that service based on the actual cost to provide the service or a cost allocation method approved by the office of management and budget) and zero fiscal note from the Office of Management and Budget. SB 247 STATE LEASES & LEASE-PURCHASE FINANCING Co-chair Pearce directed that SB 247 be brought on for discussion and further directed attention to a draft committee substitute (8-LS1447\O, Chenoweth, 1/27/94). Co- chair Frank explained that the bill was introduced by the Legislative Budget and Audit Committee to require that the judicial branch bring lease-purchase arrangements before the legislature for approval. Statutes presently provide the court system the opportunity to enter lease-purchases without legislative approval if annual debt service is less than $1 million. The Co-chairman noted that the bill was previously heard and reported out of committee before it was learned that it "deauthorized the authorization to lease-purchase a new court facility in Fairbanks." That project meets the intent of the bill since the facility was previously approved by the legislature. It should not be unapproved at this time. Co-chair Pearce noted that the present draft incorporates earlier technical amendments made by committee at page 6, line 14, and page 7, line 7, were acquisition was tied to "real property." Senator Kelly asked how the bill would apply to the University's purchase of an off-campus office building. RANDY WELKER, Legislative Auditor, again came before committee. He explained that if the University has an appropriation and legal authority to pay cash for a building, the subject bill would not apply. It applies only to financing agreements that require an annual appropriation for debt service. Co-chair Pearce voiced her understanding that it would affect the University if a lease-purchase arrangement was entered for the building. Mr. Welker concurred. Senator Kerttula voiced concern over lease costs associated with rental of office space such as the Frontier Building in Anchorage. He attested to need for legislative oversight of standard lease arrangements that obligate the state to sizable annual payments. Senator Phillips suggested that since he and Senator Frank sit on the subcommittee overseeing the leasing budget within the Dept. of Administration, that the issue be reviewed within the context of that budget. Co-chair Frank concurred, noting that if the state is leasing a facility long-term, it is preferable to eventually own it. Leasing comprises a $32 million item in the Dept. of Administration budget. Senator Kerttula suggested that leases for which the annual cost is over $500.0 and the term is longer than three years should be brought before the legislature for approval. He then voiced his belief that the proposed bill might encourage long-term leasing over lease-purchase. Discussion followed regarding automobile leasing. Senator Phillips asked that Senator Kelly submit a formal, written request for audit review. Co-chair Pearce called for objections to adoption of the "O" version of CSSB 247 (2d Fin). No objection having been raised, CSSB 247 (2d Fin) was ADOPTED. Discussion followed regarding impact of the bill on the recent purchase of the Court Plaza Building in Juneau and the Anchorage Times Building in Anchorage. Randy Welker advised that it would not impact the Court Plaza. Purchase of the Times Building is presently a fluid process. The transaction has not yet closed. It is, however, more likely than not to be concluded before the effective date of the proposed bill. Co-chair Frank explained that it was not the Legislative Budget and Audit Committee's intent to deny the purchase. Further discussion of the Times Building transaction followed. Co-chair Frank noted need to tighten the title of CSSB 247 (2d Fin) to include wording limiting lease-purchase arrangements and requiring legislative approval. He then MOVED for adoption of a conceptual amendment to tighten title language. No objection having been raised, the amendment was ADOPTED. Senator Rieger noted that the bill speaks to both lease- purchase financing and standard leases. He then suggested that, in light of concerns raised by Senator Kerttula, provisions pertaining to standard leases, at page 5, be strengthened prior to transport of the bill to the floor. Senator Kelly asked why language set forth in the letter of intent was not incorporated within the bill. Co-chair Frank explained that while it was felt it would be more appropriate for DOTPF rather then DNR to hold title, manage, operate and maintain state facilities, the intent was to provide some flexibility and not fix that requirement in statute. DOA currently oversees standard leases and thus has an interest in the process as well. Co-chair Frank MOVED that CSSB 247 (2d Fin) pass from committee with individual recommendations. He then advised that he would have no problem holding the bill in committee for possible amendment of language relating to standard leases. Senator Rieger voiced need to address lease payments that are disproportionate to the value of the building. Senator Phillips said he would take on the project over the weekend and return to committee on Monday. Co-chair Frank then WITHDREW his motion for passage, and CSSB 247 (2d Fin) was HELD in committee. ADJOURNMENT Co-chair Pearce directed that the meeting be recessed pending arrival of the Commissioner of the Dept. of Community and Regional Affairs. Commissioner Blatchford was precluded from returning to Juneau on this date. The meeting was, in effect, adjourned at approximately 9:55 a.m.